Question

Problem 10-14 Measures of Internal Business Process Performance [LO10-3]

DataSpan, Inc., automated its plant at the start of the current year and installed a flexible manufacturing system. The company is also evaluating its suppliers and moving toward Lean Production. Many adjustment problems have been encountered, including problems relating to performance measurement. After much study, the company has decided to use the performance measures below, and it has gathered data relating to these measures for the first four months of operations.

DataSpan, Inc., automated its plant at the start of the current year and installed a flexible manufacturing system. The company is also evaluating its suppliers and moving toward Lean Production. Many adjustment problems have been encountered, including problems relating to performance measurement. After much study, the company has decided to use the performance measures below, and it has gathered data relating to these measures for the first four months of operations. Month 1 2 3 4 Throughput time (days) ? ? ? ? Delivery cycle time (days) ? ? ? ? Manufacturing cycle efficiency (MCE) ? ? ? ? Percentage of on-time deliveries 81 % 77 % 74 % 71 % Total sales (units) 3180 3044 2888 2778 Management has asked for your help in computing throughput time, delivery cycle time, and MCE. The following average times have been logged over the last four months: Average per Month (in days) 1 2 3 4 Move time per unit 0.8 0.5 0.6 0.6 Process time per unit 3.5 3.3 3.2 3.0 Wait time per order before start of production 22.0 24.1 27.0 29.2 Queue time per unit 4.2 4.7 5.3 6.0 Inspection time per unit 0.6 0.7 0.7 0.6 Required: 1-a. Compute the throughput time for each month. 1-b. Compute the delivery cycle time for each month. 1-c. Compute the manufacturing cycle efficiency (MCE) for each month. 2. Evaluate the company’s performance over the last four months. 3-a. Refer to the move time, process time, and so forth, given for month 4. Assume that in month 5 the move time, process time, and so forth, are the same as in month 4, except that through the use of Lean Production the company is able to completely eliminate the queue time during production. Compute the new throughput time and MCE. 3-b. Refer to the move time, process time, and so forth, given for month 4. Assume in month 6 that the move time, process time, and so forth, are again the same as in month 4, except that the company is able to completely eliminate both the queue time during production and the inspection time. Compute the new throughput time and MCE.

Management has asked for your help in computing throughput time, delivery cycle time, and MCE. The following average times have been logged over the last four months:

	Average per Month (in days)
	1		2		3		4
Move time per unit	0.8		0.5		0.6		0.6
Process time per unit	3.5		3.3		3.2		3.0
Wait time per order before start of production	22.0		24.1		27.0		29.2
Queue time per unit	4.2		4.7		5.3		6.0
Inspection time per unit	0.6		0.7		0.7		0.6

Required:

1-a. Compute the throughput time for each month.

1-b. Compute the delivery cycle time for each month.

1-c. Compute the manufacturing cycle efficiency (MCE) for each month.

2. Evaluate the company’s performance over the last four months.

3-a. Refer to the move time, process time, and so forth, given for month 4. Assume that in month 5 the move time, process time, and so forth, are the same as in month 4, except that through the use of Lean Production the company is able to completely eliminate the queue time during production. Compute the new throughput time and MCE.

3-b. Refer to the move time, process time, and so forth, given for month 4. Assume in month 6 that the move time, process time, and so forth, are again the same as in month 4, except that the company is able to completely eliminate both the queue time during production and the inspection time. Compute the new throughput time and MCE.

Answer 1

Part 1-a

	Throughput time
Month 1	9.1	days
Month 2	9.2	days
Month 3	9.8	days
Month 4	10.2	days

Explanation:

	1	2	3	4
Throughput time in days:
Process time	3.5	3.3	3.2	3.0
Inspection time	0.6	0.7	0.7	0.6
Move time	0.8	0.5	0.6	0.6
Queue time	4.2	4.7	5.3	6.0
Total throughput time	9.1	9.2	9.8	10.2

Part 1-b

	Delivery cycle time
Month 1	31.1	days
Month 2	33.3	days
Month 3	36.8	days
Month 4	39.4	days

Explanation:

	1	2	3	4
Delivery cycle time in days:
Wait time	22.0	24.1	27.0	29.2
Total throughput time	9.1	9.2	9.8	10.2
Total delivery cycle time	31.1	33.3	36.8	39.4

Part 1-c

	Manufacturing cycle efficiency (MCE): Process time ÷ Throughput time
Month 1	(3.5/9.1) = 38.5	%
Month 2	(3.3/9.2)=35.9	%
Month 3	(3.2/9.8)=32.7	%
Month 4	(3.0/10.2)=29.4	%

Part 2

The throughput time measure displays	Favorable	Trends
The delivery cycle time days measure displays	Favorable	trends
Manufacturing cycle efficiency days measure displays	Unfavorable	trends

Part 3-a

	Month 5
Throughput Time	4.2	days
Manufacturing cycle efficiency (MCE)	71.4	%

Part 3-b

	Month 6
Throughput Time	3.6	days
Manufacturing cycle efficiency (MCE)	83.3	%

Explanation for 3-a and 3-b:

	5	6
Throughput time in days
Process time	3.0	3.0
Inspection time	0.6	0
Move time	0.6	0.6
Queue time	0.0	0.0
Total throughput time	4.2	3.6

	5	6
Manufacturing cycle efficiency (MCE):Process time ÷ Throughput time	71.4% (3.0/4.2)	83.3% (3.0/3.6)